In a situation where workers have more information about their own talents than do employers,workers cannot simply announce their relative abilities because:
A) both high- and low-ability workers have an incentive to announce they are high ability.
B) firms are incapable of screening workers.
C) workers cannot signal.
D) signaling is costly.
E) announcing these abilities is costly.

Question

Quizplus · Accepted Answer

In a situation where workers have more information about their own talents than employers, both high- and low-ability workers have an incentive to announce they are high ability to secure better positions or salaries, leading to a lack of credibility in such announcements. This is known as the problem of asymmetric information.

In a Situation Where Workers Have More Information About Their